Archives for October 2010

Energy bills update

Paul Hudson | 19:48 UK time, Tuesday, 26 October 2010

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Following on from my previous blog, there was one element I overlooked, that of the cost of upgrading the transmission network to incorporate new electricity from renewable sources.

OFGEM have said the total cost over 10 years will be £32 billion pounds. This will be the total investment that will have to be raised by the transmission grid companies, for example by raising debt. In order to help service the cost of this finance the consumer will pay £6 per household over a 10 year period which equates to £1.5 billion pounds. Businesses will also pay £1.5 billion towards this cost making a total contribution of £3 billion.

It's worth pointing out that paying for the transmission network through our electricity bills is nothing new. We currently already pay a levy on our bills for that very reason.

The issue of renewable subsidies has become more complicated since the spending review last week. It had until the review been assumed that all forms of renewable energy generation in the future would be funded by levies on our electricity bills - hidden taxation if you like.

As an example, the government have confirmed that companies across the UK will be asked to bid for grants at the end of 2010 in order to build 3 carbon capture demonstration plants. Until now it had been assumed that this would be funded by another fuel bill levy, but the government have now said that this may come from central government funds instead. A final decision on this will be reached in Spring 2011.

But back to the issue of the rising cost of energy bills to pay for renewable subsidies. I spoke to the Department of Energy and Climate Change (DECC) last week about this very issue. They estimate that the average gas and electricity bill is £620 and £500 respectively. By 2020, they estimate that the increase in gas prices due to government carbon reduction policies will be 18%, and electricity prices will be 33%.

However, they say, the impact on our energy bills will only be £13 a year, or a 1% change. The discrepancy with my figures is, according to them, 'because bills are a combination of prices and energy usage and therefore include the impact of a range of policies that improve energy efficiency by helping households reduce energy consumption.'

The notion that most of the costs associated with reaching our renewable energy generation targets by 2020 will effectively be met by better insulating our homes and being more energy efficient may take some selling to the general public.

Cost of electricity set to soar

Paul Hudson | 15:09 UK time, Friday, 15 October 2010

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The UK is the only country in the world that has legally binding targets to cut carbon emissions. By 2020, 30% of all our electricity will have to come from renewable sources. It is a well known fact that generating electricity using, for example, wind power, is much more expensive than from a coal fired power station. So to plug this gap, and make it attractive to investors to put money into building wind farms and other renewable projects, the government makes subsidies available.

The current subsidies available to build wind farms and other renewable come to £1 billion, or £13 on our annual electricity bills. Subsidies for smaller wind turbines and solar panels comes to £610 million - or £8 annually on electricity bills. So at the moment each year we already pay £21 to subsidise these projects in the form of a 'hidden' charge on our bills.

The proposed subsidies, or green taxes, by 2020, are much higher.

£1.8 billion for ground source heat pumps - £23 on our annual bills.

£1 billion towards carbon capture coal power stations (Like Richard Budge's Hatfield project in South Yorkshire) - £15 on consumer bills.

£2.6 billion to artificially increase the price of carbon - £40 on bills. This is a measure designed to make generating nuclear power more attractive, by raising the price of carbon allowances under the European emission trading scheme. This makes generating zero carbon nuclear power more attractive relative to high carbon gas or coal power plants.

So in total, proposed green taxes will equal £78 on our annual fuel bills. Added to the existing subsidy we are already paying, a total charge of around £100 will be applied to our fuel bills annually in order to meet our legally binding targets on renewable energy by 2020.

This takes no account of a new subsidy regime which the government have been considering to support burning more biomass at power stations such as Drax.

And let's not forget that the government are standing firm in their belief that any new nuclear power stations should not require any taxpayer subsidy - other than a subsidy to artificially increase the cost of carbon, as explained above. Some utility companies believe that this is simply not incentive enough to kick-start the building of new nuclear power stations.

Next week's spending review could mean there are changes to the level of some of these subsidies. But one thing is for certain. The cost of electricity looks set to surge in the next few years in order to de-carbonise our economy.

Winter 2010/2011 update: Cold and dry?

Paul Hudson | 14:52 UK time, Tuesday, 5 October 2010

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A number of you have been in touch regarding precipitation levels this winter which I didn't mention in the previous blog.

All models seem to be in agreement that next winter will be drier than average. A vivid illustration of this can be seen below showing the European model. The red colour is indicative of higher pressure than normal.



If we take this at face value, it suggests the area of highest pressure to be positioned across Southern parts of the UK and into Central Europe. This would mean not especially cold temperatures, as the wind direction would not be from the North or East. So it's no surprise that the European model is expecting temperatures this winter to be close to normal.

But it wouldn't take much for the centre of gravity of the high pressure area to be in a different position. Indeed, the fact that the American model signals colder temperatures than the European model this winter illustrates this point, suggesting a bias to air from a colder direction, on average.

The forecast shown on my previous blog, showing 3 monthly temperature means from the American model, are relative to the 1981-2006 average and if correct for the winter period of Dec, Jan and Feb indicate a colder than average winter, but not as cold as last winter.

Having seen computer model output from the 3 main centres - the Met Office, the European Centre for Medium Range Forecasting (ECMWF) and the American centre (NCEP) - the conclusion is that this winter is likely on average to be dominated by High pressure, with below average rainfall and temperatures colder than average. Moreover a mild and wet winter, with West or Southwest winds, which have been such a feature of our climate for much of the last 20 years, again seems unlikely.

Another cold winter ahead?

Paul Hudson | 17:14 UK time, Friday, 1 October 2010

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It's the time of the year when there is always a lot of interest in winter forecasts, more so than in previous years, largely as a result of what happened last winter - which as we all know was the coldest for over 30 years.

And once again, a colder than average winter looks the most likely outcome based on the latest projections.

The latest American model is shown below.

The winter season is shown as colder than average - indicating that a 'blocked' weather pattern is on average likely to dominate with the jet stream further south than normal. The American model successfully predicted last winters' cold conditions.

The Met Office don't issue their seasonal forecast to the general public anymore, using them for internal research purposes only, but as I understand it, their forecast also suggests that the probability of a cold winter is higher than normal.

It would seem that one of the reasons for a higher probability of another cold winter is down to a forecast negative NAO (North Atlantic oscillation).

The NAO is a way of describing pressure patterns in the Atlantic.

Climatologically, a low-pressure system over Iceland and a high-pressure system over the Azores determine that westerly winds prevail across western Europe. The relative strength and position of these systems varies from year to year; this variation is known as the North Atlantic Oscillation (NAO).

A large difference in the pressure at the two stations (a high or positive NAO) leads to increased westerlies and mild and wet winters across the UK and Northwest Europe.

In contrast, if the index is low (negative NAO) westerlies are suppressed, and the UK and Europe suffer cold winters as the jet stream steers depressions through Spain and Portugal and into the Mediterranean.

The forecast NAO is calculated using a formula which incorporates sea surface temperature anomalies in Spring and early Summer.

But a negative NAO does not always mean a cold winter here in the UK.

For example, in the past, a negative NAO has been a successful indicator of a cold winter across Continent Europe - but with the UK right on the edge of milder air from the Atlantic, with a resulting battle between mild and wet weather from the west, and much colder weather further east.

Of course readers of this blog will by now know that the ongoing low solar activity, and the previous protracted solar cycle all suggest a higher than normal probability of a blocked winter weather pattern leading to colder than average weather conditions.

There are of course no guarantees with long range forecasts, but It could be another very interesting winter if latest projections prove to be correct.

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